No one likes getting injured or sick, but sometimes life throws things at you that you’re not expecting. An unexpected health event – sickness or injury – can put pressure on your financial well being and often your mental well being too. The bills don’t stop just because you’re injured unfortunately.
What is income protection insurance?
Income protection insurance is designed to provide you with an income when you’re injured or sick. It is sometimes also called salary continuance insurance. The income protection insurance policy outlines the terms of your cover and it’s important that you understand what you are buying so you have real peace of mind. Income protection insurance can be beneficial to employees, the self-employed people, small business owners and professionals.
What are the typical features of an income protection insurance policy?
- Most income protection policies will pay up to 75% of your income.
- Income protection payments can be used to pay bills, credit cards, mortgage, family expenses, food and anything else you’d normally pay for. The money is yours to use as you wish to.
- Payments can last for a maximum time period set out in the policy, this could be 2 years through to age 70 depending on your personal situation. You often get to choose the waiting period of the policy. Often a longer waiting period means cheaper premiums, but there’s no point to having a long waiting period if you need your income replaced quickly.
- You can pay for your policy by stepped or level premiums, or sometimes a mix of both. Stepped premiums means that as you get older your premiums will increase. It’s likely though your premiums will be cheaper at the start. Level premiums mean that your premium does not change with your age. Your premiums can go up over time though to cover inflation or insurers fees.
- If income insurance is held outside of superannuation, premiums are usually tax deductable, because just like income, payments from an income protection policy are usually taxable as it is considered income.
- Many different insurance providers offer income protection cover and their policies are often very different. It’s important you understand what your coverage includes and excludes.
- Generally a policy outside of superannuation has a number of additional benefits when compared to cover held via superannuation. You need to consider your personal situation to ensure the best contract is available for you.
How do you determine if income protection cover is right for you?
Seeking advice can help you understand how income protection insurance can protect you in the event of illness or injury.
Financial planning advice can help you work out:
- What kind of insurance cover you need – including income protection insurance
- The kinds of illness or injury that you’ll be covered for
- If it’s more appropriate for you to hold cover inside or outside of superannuation
- What kind of waiting period is appropriate for your situation, considering your work leave entitlements and income needs
- If your premiums should be stepped or level
- Which income protection insurance provider is appropriate
- When to review your cover, because life changes over time and your insurance should reflect your changing needs and lifestyle.
To make an appointment to speak with Luke, please call Envision Financial Services on 02 6260 4749 or contact us here. Luke looks forward to speaking with you about your income protection requirements.